Ireland ran a lower-than-expected 2021 budget deficit of around 4% of the economy. This is due to a surge in tax receipts, which includes another record contribution from the corporate sector. The ministry had forecast in October that it would finish the year with a deficit of 5.9% of modified gross national income. The most accurate measure of the size of Ireland’s economy came down from 8.8% last year.
The 68.4 billion euros of tax collected last year was the largest yield ever. Spending was also 1.5% below forecast after government departments did not use the record amounts allocated to them. The 15.3 billion euros in corporate tax was sharply up on the previous high of 11.8 billion euros in 2020. Corporate receipts are mostly generated from the large hub of multinational companies. The total corporate returns for 2021 almost passed out all the annual VAT take for the first time.
In a news conference, the finance ministry’s chief economist, John McCarthy said that this represented a phenomenal development. Income tax and VAT are the two largest tax categories that finished last year 4.8% and 7.5% above forecast. The wages grew strongly in high earning sectors such as technology. McCarthy added that Ireland will likely run a deficit lower than the 3.4% of economic activity forecast for 2022. A deficit of just 0.4% is currently pencilled in for 2023.
He also expects corporate tax receipts to increase again this year. And that too before international reforms made to the way large multinationals are taxed kick in. Finance Minister Paschal Donohoe said that it was highly likely that at some stage corporate receipts would decline.